Total addressable market (TAM), also called total available market, is a term that is typically used to reference the revenue opportunity available for a product or service. TAM helps prioritize business opportunities by serving as a quick metric of a given opportunity's underlying potential.[1]
One approach is to estimate how much of the market any company can gain if there were no competitors. A more encompassing variation is to estimate the market size that could theoretically be served with a specific product or service. TAM can be defined as a global total (even if a particular company could not reach some of it) or, more commonly, a market that one specific company could serve (within realistic expansion scenarios). This focuses strategic marketing and sales efforts and addresses actual customer needs. The inclusion of constraints such as competition and distribution challenges then modifies the strategy to frame it with realistic boundaries, reducing the market down to the serviceable available market (SAM), the percentage of the market that can be served (either by that company or all providers) out of the TAM.[1] This is occasionally referred to as PAU (Potential Active Use).
Total addressable market (TAM), or total available market, is the total market demand for a product or service,[2] calculated in annual revenue or unit sales if 100% of the available market is achieved.
Serviceable available market (SAM) is the portion of TAM that is reachable and can potentially be served by a company's products or services.[2]
Serviceable obtainable market (SOM), share of market, or Target Market, is the percentage of SAM which is realistically reached.[2]
For example, the total UK consumer expenditure on food in 2014, which is the total addressable market of food, was £198 billion (including catering, alcoholic drinks, non-alcoholic drinks and other foods).[3] The serviceable available market for alcoholic drinks, which producers of alcoholic beverages target and serve, is £49 billion.[3] Since the market for alcoholic drinks is not a monopoly, the share of market for a company producing alcoholic beverages can never reach 100% of SAM.[4]
Importanceedit
The total addressable market shows the potential scale of the market. Estimating TAM is the first step for entrepreneurs to start up their business. It is important to estimate TAM objectively instead of exaggerating or underestimating this value with subjective attitudes, as it is vital to allocate a suitable market with potential growing capacity. Investors often tend to look for markets with high TAM values, showing confidence in such markets with great potential to increase demand for their products and services. This is a reasonable deduction, while on the other hand, a high value of TAM is not necessarily a good sign, as the total available market does not mean the high degree of demand obtained. Some other factors, such as competition level in the market, accessibility of resources, etc. would also affect the performance of the company. Hence SAM and SOM are also critical indicators to measure if the market is worth investing.[5]
Illustrations of real-world news about TAMedit
The Morgan Stanley analyst Katy Huberty said in her 2015 research report that Apple could reach $3.4 trillion of total addressable market by 2020, from $800 billion today, since it expands into new markets such as cars.[6]
Alibaba still has potential to incredibly increase total addressable market up to 40%, stated by Jim O'Donnell, Chief Investment Officer of Forward Management, as he believes Alibaba is expanding not only China's market but also markets outside China.[7]
The total addressable market for pulsed RF power semiconductor keeps increasing despite degeneration in the market for wireless infrastructure, as manufacturers are stepping into the new markets for pulsed RF power semiconductors such as transportation and military.[8]
The general public poorly realizes the market size for microwave tubes (valves). Yet, its total addressable market has reached nearly $1 billion, as microwave tubes are commonly used in areas such as military, medical and space communication applications.[9]
The total addressable market for comparators (a device used to compare two currents or voltages) reached $173 million in 2003. It would get $273 million in 2009.[10]
The market for contracted manufacturing services keeps growing compared with electronics manufacturing services (EMS) and original design manufacturers (ODM). Its serviceable obtainable market reached $560 million in 2001 and has a potential to obtain 27% of the total addressable market of electronics and IT industry by 2006, stated by Kevin Kane, program manager for IDC's Contract Manufacturing Services.[11]
^"Understanding Market Size, or Demystifying TAM, SAM and SOM". www.caycon.com. Retrieved 2015-10-28.
^Aulet, Bill (2013). Disciplined entrepreneurship : 24 steps to a successful startup. Hoboken: N.J. : J. Wiley & Sons. p. 45. ISBN9781118692288.
^Patrick, Seitz (March 20, 2015). "Apple could quadruple its total addressable market by 2020". Investor's Business Daily. Investor's Business Daily, Inc. ISSN 1061-2890. ProQuest 1659821677.
^Ritesh, Anan (January 30, 2015). "Jim O'Donnell: The Total Addressable Market Alibaba Still Has To Penetrate Is Huge". Business And Economics--Banking And Finance. Accretive Capital LLC d/b/a Benzinga. ProQuest 1649186435.
^Cliff, Drubin (November 2014). "Pulsed RF Power Semiconductor Device Markets to Exceed $300M by 2019". Microwave Journal, International Ed. Horizon House Publications, Inc.: 64. ISSN 0192-6225. ProQuest 1626834515.
^"Total Available Market for Microwave Tubes Approaching $1 B". Engineering--Electrical Engineering. Horizon House Publications, Inc.: 49–50 January 2009. ISSN 0192-6225. ProQuest 204972805.
^"Research and Markets: Total available market for comparators reached $173 million in 2003". M2 Presswire. Coventry, United Kingdom: Normans Media Ltd. April 7, 2004. ProQuest 443755401.
^"Contract Manufacturing To Capture 27% Of The Electronics and IT Total Available Market by 2006, According to IDC". PR Newswire. PR Newswire Association LLC. October 31, 2002. ProQuest 443712081.
April 11, 2024
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This article may require cleanup to meet Wikipedia s quality standards The specific problem is poorly written disorganized confusing examples Please help improve this article if you can May 2017 Learn how and when to remove this template message Total addressable market TAM also called total available market is a term that is typically used to reference the revenue opportunity available for a product or service TAM helps prioritize business opportunities by serving as a quick metric of a given opportunity s underlying potential 1 Total Available Market TAM Served or Serviceable Available Market and Target Market One approach is to estimate how much of the market any company can gain if there were no competitors A more encompassing variation is to estimate the market size that could theoretically be served with a specific product or service TAM can be defined as a global total even if a particular company could not reach some of it or more commonly a market that one specific company could serve within realistic expansion scenarios This focuses strategic marketing and sales efforts and addresses actual customer needs The inclusion of constraints such as competition and distribution challenges then modifies the strategy to frame it with realistic boundaries reducing the market down to the serviceable available market SAM the percentage of the market that can be served either by that company or all providers out of the TAM 1 This is occasionally referred to as PAU Potential Active Use Contents 1 Difference between TAM SAM and SOM 2 Importance 3 Illustrations of real world news about TAM 4 See also 5 ReferencesDifference between TAM SAM and SOM editTotal addressable market TAM or total available market is the total market demand for a product or service 2 calculated in annual revenue or unit sales if 100 of the available market is achieved Serviceable available market SAM is the portion of TAM that is reachable and can potentially be served by a company s products or services 2 Serviceable obtainable market SOM share of market or Target Market is the percentage of SAM which is realistically reached 2 For example the total UK consumer expenditure on food in 2014 which is the total addressable market of food was 198 billion including catering alcoholic drinks non alcoholic drinks and other foods 3 The serviceable available market for alcoholic drinks which producers of alcoholic beverages target and serve is 49 billion 3 Since the market for alcoholic drinks is not a monopoly the share of market for a company producing alcoholic beverages can never reach 100 of SAM 4 Importance editThe total addressable market shows the potential scale of the market Estimating TAM is the first step for entrepreneurs to start up their business It is important to estimate TAM objectively instead of exaggerating or underestimating this value with subjective attitudes as it is vital to allocate a suitable market with potential growing capacity Investors often tend to look for markets with high TAM values showing confidence in such markets with great potential to increase demand for their products and services This is a reasonable deduction while on the other hand a high value of TAM is not necessarily a good sign as the total available market does not mean the high degree of demand obtained Some other factors such as competition level in the market accessibility of resources etc would also affect the performance of the company Hence SAM and SOM are also critical indicators to measure if the market is worth investing 5 Illustrations of real world news about TAM editThe Morgan Stanley analyst Katy Huberty said in her 2015 research report that Apple could reach 3 4 trillion of total addressable market by 2020 from 800 billion today since it expands into new markets such as cars 6 Alibaba still has potential to incredibly increase total addressable market up to 40 stated by Jim O Donnell Chief Investment Officer of Forward Management as he believes Alibaba is expanding not only China s market but also markets outside China 7 The total addressable market for pulsed RF power semiconductor keeps increasing despite degeneration in the market for wireless infrastructure as manufacturers are stepping into the new markets for pulsed RF power semiconductors such as transportation and military 8 The general public poorly realizes the market size for microwave tubes valves Yet its total addressable market has reached nearly 1 billion as microwave tubes are commonly used in areas such as military medical and space communication applications 9 The total addressable market for comparators a device used to compare two currents or voltages reached 173 million in 2003 It would get 273 million in 2009 10 The market for contracted manufacturing services keeps growing compared with electronics manufacturing services EMS and original design manufacturers ODM Its serviceable obtainable market reached 560 million in 2001 and has a potential to obtain 27 of the total addressable market of electronics and IT industry by 2006 stated by Kevin Kane program manager for IDC s Contract Manufacturing Services 11 See also editDemographic profile Market segmentation Mass marketing Niche market Precision marketing Serviceable available market Target marketReferences edit a b Steve Blank and Bob Dorf The Startup Owner s Manual K amp S Ranch first edition March 1 2012 ISBN 978 0984999309 a b c TAM SAM SOM what it means and why it matters The Business Plan Shop 2013 12 12 Retrieved 2015 10 25 a b Food statistics pocketbook 2015 Publications GOV UK www gov uk Retrieved 2015 10 28 Understanding Market Size or Demystifying TAM SAM and SOM www caycon com Retrieved 2015 10 28 Aulet Bill 2013 Disciplined entrepreneurship 24 steps to a successful startup Hoboken N J J Wiley amp Sons p 45 ISBN 9781118692288 Patrick Seitz March 20 2015 Apple could quadruple its total addressable market by 2020 Investor s Business Daily Investor s Business Daily Inc ISSN 1061 2890 ProQuest 1659821677 Ritesh Anan January 30 2015 Jim O Donnell The Total Addressable Market Alibaba Still Has To Penetrate Is Huge Business And Economics Banking And Finance Accretive Capital LLC d b a Benzinga ProQuest 1649186435 Cliff Drubin November 2014 Pulsed RF Power Semiconductor Device Markets to Exceed 300M by 2019 Microwave Journal International Ed Horizon House Publications Inc 64 ISSN 0192 6225 ProQuest 1626834515 Total Available Market for Microwave Tubes Approaching 1 B Engineering Electrical Engineering Horizon House Publications Inc 49 50 January 2009 ISSN 0192 6225 ProQuest 204972805 Research and Markets Total available market for comparators reached 173 million in 2003 M2 Presswire Coventry United Kingdom Normans Media Ltd April 7 2004 ProQuest 443755401 Contract Manufacturing To Capture 27 Of The Electronics and IT Total Available Market by 2006 According to IDC PR Newswire PR Newswire Association LLC October 31 2002 ProQuest 443712081 Retrieved from https en wikipedia org w index php title Total addressable market amp oldid 1205863543, wikipedia, wiki, book, books, library,
